Highlights of the Recent 2007 Version of A201, the "General Conditions of the Contract for Construction"
Foster Swift Construction Law News
The American Institute of Architects ("AIA") recently published revised versions of some of its key contract documents, many of which had not been revised since 1997. Among the key documents revised is the widely used A201 entitled "General Conditions of the Contract for Construction." A comprehensive analysis of each of the revised provisions of the new A201 is beyond the scope of this article. Nonetheless, the following are some of the key changes to the 2007 version of the A201.
Under the 1997 A201, disputes arising between the owner and contractor were first referred to the project architect for an initial decision. The 2007 A201 now allows the parties to instead hire a third party initial decision maker to attempt to resolve such disputes. If the owner and contractor do not elect to pay the additional fee and hire a third party decision maker, the project architect still may serve as the initial decision maker.
If the initial decision making process fails, under the 1997 A201, the parties were then required to attempt to mediate the dispute before proceeding to arbitration, which was the default method of binding dispute resolution. Although the parties still are required to submit to mediation before turning to either arbitration or litigation, the 2007 version of A101 (not the A201) allows the owner and contractor to select either mandatory arbitration or litigation as the method of binding dispute resolution. If neither option is selected when the contract is drafted, the default method of dispute resolution is now litigation.
The most significant change to the insurance language of the A201 is that the contractor is now required to name the owner and the architect as additional insureds on contractor’s liability policies. Additionally, the contractor is now required to obtain completed operations coverage, which must also name the owner as an additional insured.
The Project Management Liability Insurance requirement in the 1997 A201 was removed in the 2007 version. According to the AIA, feedback received during the revision process indicated that this requirement was rarely used by owners and contractors.
The 2007 A201 places restrictions on a contractor’s right to demand financial information from the owner after the work on the project commences. In the 1997 version, the contractor was permitted at any time during the project to request that the owner provide evidence of sufficient financing for the project. Under the 2007 A201, the contractor still may request such information before the work commences. After the work commences, however, the contractor may only request such information if the owner fails to make payment, if there is a material change in the work or if the contractor identifies, in writing, a reasonable concern regarding the owner’s ability to make payment in a timely manner.
The 2007 A201 also contains more stringent requirements regarding payment to subcontractors and suppliers. The contractor is now required to issue payment to its subcontractors and suppliers within seven days of receipt of payment from the owner. Similarly, the owner now has the right to demand that the contractor provide the owner with satisfactory evidence that it has paid its subcontractors and suppliers. If the contractor fails to provide such evidence, the owner may contact such subcontractors and suppliers directly and has the ability to issue checks made jointly payable to the contractor and the subcontractors and suppliers.
Consolidation and Joinder
The AIA documents have historically prohibited joining arbitration claims by the owner against the architect with claims against the contractor. Owners do not like that arrangement since it prevents an owner from getting its builder and designer into the same arbitration, unless they both consent. The result can be multiple, costly arbitrations and inconsistent outcomes. Owners and their lawyers routinely change that clause. In 2007, this was deleted and the owner can now join builders and designers in one arbitration.
Time Limits on Claims
In Section 13.7 of the 1997 edition of A201, the concept of an internal statute of limitations was introduced. This clause dictated when statute of limitations would begin to run. The result was that some claims were barred before they ever even occurred. The clause was often deleted, especially by owners who argued the clause is unfair, and the parties should stick with State law. The new A201 deletes former Section 13.7 and revises it to state that the applicable State law governs. AIA’s new clause says that the time limit for commencing claims is determined by State law, but in any case not more than 10 years after Substantial Completion.